Which ETFs work well together to build a balaned portfolio

Hi there! Building a balanced portfolio with ETFs is a great strategy for diversification and can cater to both short-term and long-term investment goals. Here are a few strategies and combinations that might help you in setting up a well-rounded ETF portfolio:

1. Geographical Diversification: You can combine domestic ETFs with international ETFs. For example, an Australian shares ETF (like ASX: A200, which tracks the ASX 200) can be paired with a global shares ETF (such as ASX: VGS, which tracks a broad range of international stocks). This helps spread your investment risk across different economies and markets.

2. Asset Class Diversification: Including ETFs from different asset classes can also be beneficial. For instance, you might consider a mix of equity ETFs, bond ETFs, and real estate ETFs (REITs). An example could be combining an Australian equities ETF, a global bond ETF (like ASX: BOND), and a global real estate ETF (such as ASX: DJRE).

3. Sector-Specific ETFs: If you have a view on specific sectors that might outperform (like technology, healthcare, or green energy), you can include sector-specific ETFs. For example, a technology ETF (like ASX: NDQ, which tracks the NASDAQ-100) could be paired with a more conservative, broad-market ETF for balance.

4. Factor-Based ETFs: These ETFs are selected based on specific characteristics like low volatility, high dividend yields, or momentum. Combining a high-dividend ETF (like ASX: VHY) with a low-volatility ETF can provide a mix of income and reduced risk.

When considering ETF combinations, it’s important to look at the correlation between the ETFs to ensure they provide the diversification benefits you’re seeking. Lower correlation between the assets generally provides better diversification.

Pearler offers a platform that can facilitate the building and tracking of such diversified portfolios. With its focu

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Hi James.

The most popular combinations I’ve seen are:

VAS/A200 and IVV
VAS/A200 and VGS/BGBL
VAS/A200 and VTS+VEU

Typically an Aussie index plus a global or US index seems to be the most favoured options for relatively broad diversification.

Hope that helps.